Summary Background Cutaneous hyperpigmentation occurs in multiple conditions. In addition, many Asian women desire a lighter skin colour. Thus, there is a need for the development of skin lightening agents. Niacinamide is a possible candidate. Objectives To investigate the effects of niacinamide on melanogenesis in vitro and on facial hyperpigmentation and skin colour in vivo in Japanese women. Methods Melanin production was measured in a purified mushroom tyrosinase assay, cultured melanocytes, a keratinocyte/melanocyte coculture model, and a pigmented reconstructed epidermis (PREP) model. The clinical trials included 18 subjects with hyperpigmentation who used 5% niacinamide moisturizer and vehicle moisturizer in a paired design, and 120 subjects with facial tanning who were assigned to two of three treatments: vehicle, sunscreen and 2% niacinamide + sunscreen. Changes in facial hyperpigmentation and skin colour were objectively quantified by computer analysis and visual grading of high-resolution digital images of the face. Results Niacinamide had no effect on the catalytic activity of mushroom tyrosinase or on melanogenesis in cultured melanocytes. However, niacinamide gave 35–68% inhibition of melanosome transfer in the coculture model and reduced cutaneous pigmentation in the PREP model. In the clinical studies, niacinamide significantly decreased hyperpigmentation and increased skin lightness compared with vehicle alone after 4 weeks of use. Conclusions The data suggest niacinamide is an effective skin lightening compound that works by inhibiting melanosome transfer from melanocytes to keratinocytes.